Should dividend stocks have a place in your portfolio as the market continues to churn? The coronavirus from China is delivering a level of uncertainty that investors despise. Aside from the understandable — if perhaps overstated — health concerns, investors are trying to evaluate the impact on global supply chains. Investment banks JPMorgan Chase (NYSE:JPM), Morgan Stanley (NYSE:MS) and Goldman Sachs (NYSE:GS) are all concerned about global economic growth due to the coronavirus. Moreover, Goldman Sachs projected that the coronavirus may wipe out corporate earnings growth for 2020.
However, for most investors, this is not a time to panic. Rather than take a flight to safety, now is a time to take a flight to quality. And when investors look for quality stocks in volatile markets, dividend stocks take center stage.
One benefit of dividend stocks is that they are generally in defensive sectors of the market. This means that their products will be in demand regardless of how the broader economy looks.
However, the reason why dividend stocks look attractive now is that some of them are giving investors some capital growth, as well.
That said, let’s dive into three dividend stocks that investors should look to in order to ride out this market volatility.
Dividend Stocks for Volatility: Procter & Gamble (PG)
Dividend Yield: 2.5%
Procter & Gamble (NYSE:PG) is one stock that should clean up as the market digests the impact of the coronavirus. P&G recently launched a new brand, Microban 24, which includes a line of surface antibacterial cleaning products. Microban comes in both sanitizing spray and cleanser forms, and its unique selling proposition is that it offers 24-hour protection. After consumers apply Microban and allow it to air dry, the solution releases small amounts of anti-bacterial ingredients over the span of 24 hours.
Since Microban was in development long before the outbreak of the coronavirus, it’s unrealistic to view the launch as anything but a happy accident for Procter & Gamble. Nonetheless, the product will undoubtedly get a boost which should the company’s quarterly revenue.
Furthermore, PG stock currently pays an annual dividend of $2.98 per share with a dividend yield of around 2.5%. By themselves, yields are an imperfect measuring stick. However, this percentage yield is significantly larger than the Soap & Cleaning Materials sector (2.26%) and the S&P 500 (2.07%).
The company has delivered an average 2.9% dividend growth over the last three years. Plus Procter & Gamble is considered a dividend king with 63 consecutive years of annual dividend growth.
Dividend Yield: 5.1%
The key word for AbbVie (NYSE:ABBV) will be synergy. AbbVie is losing the patent protection on its flagship drug, Humira. The rheumatoid arthritis drug is responsible for nearly 50% of AbbVie’s revenue. However, AbbVie is close to finalizing its purchase of Allergen and this will provide the company with $2 billion of synergies that will lead to combined earnings that will be 10% higher in the first year.
And the reality for AbbVie is that the company is moving beyond Humira. Sales of the drug are already softening in Europe (23% decline in the first quarter). And while U.S. sales remain strong (Humira sales grew 7%), the company is looking for what’s next.
To that end, AbbVie currently has a drug in its pipeline that is being used to treat the coronavirus. The company also has a solid pipeline of oncology and anti-viral drugs. And for dividend investors, the important thing to know is AbbVie has massive cash flow.
AbbVie stock currently pays an annual dividend of $4.72 per share with a dividend yield of about 5.1%. Additionally, the company has posted annual dividend growth of 22.62% over the last three years. Moreover, AbbVie is a dividend aristocrat that has delivered 47 years of consecutive dividend growth.
Dividend Yield: 5.7%
Shares of AT&T (NYSE:T) stock gave a valiant effort at holding its 2020 gains through the correction. However, T stock is currently slightly negative for the year. But, it has remained in positive territory over the last 12 months.
One reason for the stock’s growth is the anticipated launch of 5G offerings from Apple (NASDAQ:AAPL) and Samsung later this year. But investors looking at the here and now can count on AT&T as a good defensive stock.
Plus, in 2018, AT&T paid $85 billion to acquire content from Time-Warner. This new business unit, Warner Media — which includes HBO — puts AT&T into the streaming wars. And as more customers may be choosing to spend more time under voluntary quarantine, there is an opportunity for its offering to get legs.
Also, don’t forget they already have a relationship with DirecTV. Some analysts express concern about the long-term partnership between the companies. However, DirecTV has the contract for the NFL Sunday Ticket through the 2020 season — and that is a significant profit driver for the company.
AT&T stock currently pays an annual dividend of $2.08 per share with a dividend yield of nearly 5.7%. The company has posted annual dividend growth of 2% over the last three years and is a dividend aristocrat with 35 years of consecutive dividend growth.
As of this writing, Chris Markoch did not hold a position in any of the aforementioned securities.